GlobeNewswire Inc | Aug 4, 2021 07:30AM EDT

August 04, 2021

ATCHISON, Kan., Aug. 04, 2021 (GLOBE NEWSWIRE) -- MGPIngredients, Inc. (Nasdaq:MGPI), a leading provider of distilled spirits, branded spirits, and food ingredient solutions, today reported results for the second quarter ended June 30, 2021.

2021 second quarter results compared to 2020 second quarter results

-- Consolidated sales increased 89.0% to $174.9 million, as a result of strong growth in each of the reporting segments. -- Consolidated gross profit increased 174.5% to $56.8 million, representing 32.5% of consolidated sales, due to record gross profit in each of the reporting segments. -- Non-GAAP gross profit increased 186.7% to $59.4 million, representing 33.9% of consolidated sales. -- Consolidated operating income increased 144.0% to $27.7million; non-GAAP operating income increased 204.7% to $36.9 million. -- Earnings per share ("EPS") increased to $0.91 per share from $0.50 per share; non-GAAP EPS increased to $1.27 per share from $0.54 per share. -- Adjusted EBITDA increased to $42.3 million from $15.7 million, representing a 169.8% increase.

The record consolidated quarterly results reflect the progress our team has made toward executing our long-term strategic plan, said David Colo, president and CEO of MGP Ingredients. Sales of premium beverage alcohol increased 54.2%, primarily driven by brown goods sales growth of 72.8% from last year, which was due to both higher aged whiskey and new distillate sales. The American Whiskey category remains robust, and we continue to optimize our significant share and scale advantage to grow the business.

Integration of our recently completed acquisition of Luxco remains on track, including achievement of the synergy expectations we shared earlier in the year, continued Colo. This additional platform is already improving our gross profit and cash flow generation profile and provides long term growth opportunities for the company. We also recently announced three key leadership changes, David Bratcher was elevated to Chief Operating Officer, Amel Pasagic was appointed Chief Information Officer and Erika Lapish joined as Vice President Human Resources. David, Amel and Erika are proven leaders and further strengthen our capability of executing our long-term strategies.

Distillery Products SegmentIn the second quarter of 2021, sales for the Distillery Products segment increased 20.8% to $90.3million, reflecting a 54.2% increase in sales of premium beverage alcohol, as a result of higher aged whiskey, white goods and new distillate sales. Gross profit increased to $32.0 million or 35.4% of segment sales, compared to $15.9 million, or 21.2% of segment sales in the second quarter 2020.

We posted another record quarter in the Distillery Products segment, primarily driven by strong aged whiskey sales, as a result of the continued robust consumer demand for our premium beverage alcohol offerings, said Colo. The macro consumer trend supporting the ongoing growth of the American Whiskey category remains solid, which is confirmed by the demand were experiencing from new and existing brown goods customers.

White goods sales also posted solid growth of 22.4% from the prior year period, primarily due to improved prices. As for industrial alcohol products, we have seen additional supply enter the market this quarter and we anticipate spot market margins will normalize and return to historical levels as demand moderates over the next several quarters.

Branded Spirits SegmentIn the second quarter of 2021, sales for the Branded Spirits segment totaled $60.4 million, primarily due to the Luxco acquisition. Gross profit increased to $18.4 million or 30.5% of segment sales, compared to $0.1 million, or 38.5% of segment sales in the second quarter 2020. Excluding the impact of purchase accounting related to the Luxco acquisition, gross margin totaled 35.7% for the quarter.

The results for this newly created segment exceeded our expectations this quarter, commented Colo. We are very pleased with the ongoing consumer demand for our brands, as we continue to focus on improving our portfolio profitability by optimizing gross profits and margins, as well as the marketing mix across all of our brands.

Ingredient Solutions SegmentFor the second quarter of 2021, sales in the Ingredient Solutions segment increased 39.1% to $24.2million. Gross profit increased to $6.4million, or 26.5% of segment sales, compared to $4.7 million, or 27.1% of segment sales in the second quarter 2020.

As expected, this quarters results reflect the solid demand we continue to experience for our specialty wheat proteins and starches in the Ingredient Solutions segment, said Colo. We believe our diverse customer base and product offering continue to be aligned with strong consumer trends.

OtherMGP experienced a fire at the Atchison facility during the fourth quarter 2020, which damaged feed drying equipment and caused a temporary loss of production time. During the second quarter, the Company recorded a $6.2 million partial settlement from its insurance carrier and is working to construct a replacement drying system that is anticipated to be operational in the fourth quarter of 2021.

Corporate selling, general and administrative ("SG&A") expenses for the second quarter 2021 increased to $29.2 million as compared to $9.4 million in the second quarter 2020, primarily driven by the assumption of Luxco SG&A expenses, as well as one-time acquisition related costs.

The corporate effective tax rate for the quarter was 24.2% compared with 23.1% in the year ago period due to higher pre-tax income, which lessened the proportionate effects of tax credits received.

EPS increased to $0.91 for the second quarter 2021 based on 21.9 million shares outstanding, compared to $0.50 for the second quarter 2020 based on 16.9 million shares outstanding. Second quarter 2021 non-GAAP EPS increased to $1.27 per share from $0.54 per share, as compared to the prior year period.

2021 OutlookMGP is offering the following consolidated guidance for fiscal 2021, including Luxco's financial results:

-- Sales are projected to be in the range of $570 million to $580 million. -- Adjusted EBITDA is expected to be in the range of $105 million to $110 million. -- Adjusted earnings per share are forecasted to be in the $2.90 to $3.00 range, with weighted average shares outstanding expected to be approximately 20.7 million at year end.

ConclusionWhile we are off to a strong start to the year, we remain conscientious of the pandemics continued uncertainty and its potential impact on our results, said Colo. We remain committed to the execution of our long-term growth strategy, further building on the momentum from last quarter and year. Our three business segments are uniquely aligned with strong consumer trends, which we believe will create long-term and sustainable shareholder value. While we are very pleased with the unprecedented aged whiskey sales year to date, our full year guidance reflects aged whiskey demand to moderate in the back half of the year and over the long-term, to grow in line with the overall American Whiskey category.

Conference Call and Webcast InformationMGP Ingredients will host a conference call for analysts and institutional investors at 10 a.m. ET today to discuss these results and current business trends. The conference call and webcast will be available via:

Webcast: ir.mgpingredients.comon the Events & Presentations pageConference Call: 844-308-6398 (domestic) or 412-717-9605 (international)

About MGP Ingredients, Inc.MGP Ingredients, Inc. (Nasdaq: MGPI) is a leading producer of premium distilled spirits, branded spirits, and food ingredient solutions. Since 1941, we have combined our expertise and energy aimed at formulating excellence, bringing product ideas to life collaboratively with our customers.

As one of the largest distillers in the U.S., MGPs offerings include bourbon and rye whiskeys, gins, and vodkas, which are created at the intersection of science and imagination, for customers of all sizes, from crafts to multinational brands. With U.S. distilleries in Kentucky, Indiana, Kansas, and Washington D.C., and bottling operations in Missouri, Ohio, and Northern Ireland, MGP has the infrastructure and expertise to create on any scale.

MGPs branded spirits portfolio covers a wide spectrum of brands in every segment, including iconic brands from Luxco, which was founded in 1958 by the Lux Family. Luxco is a leading producer, supplier, importer and bottler of beverage alcohol products. Our branded spirits mission is to meet the needs and exceed the expectations of consumers, associates and business partners. Luxcos award-winning spirits portfolio includes well-known brands from five distilleries: Bardstown, Kentucky-based Lux Row Distillers, home of Ezra Brooks, Rebel, Blood Oath, David Nicholson and Daviess County; Lebanon, Kentucky-based Limestone Branch Distillery, maker of Yellowstone Kentucky Straight Bourbon Whiskey, Minor Case Straight Rye Whiskey and Bowling & Burch Gin; Jalisco, Mexico-based Destiladora Gonzlez Lux, producer of 100% agave tequilas, El Mayor, Exotico and Dos Primos; MGPs historic distillery in Lawrenceburg, Indiana, where the George Remus Straight Bourbon Whiskey and Rossville Union Straight Rye Whiskey are produced; and the Washington, D.C.-based Green Hat Distillery, producer of the Green Hat family of gins. The innovative and high-quality brand portfolio also includes Everclear Grain Alcohol, Pearl Vodka, Saint Brendans Irish Cream, The Quiet Man Irish Whiskey and other well-recognized brands.

In addition, our Ingredient Solutions segment offers specialty proteins and starches that help customers harness the power of plants and provide a host of functional, nutritional and sensory benefits for a wide range of food products.

The transformation of American grain into something more is in the soul of our people, products, and history. Were devoted to unlocking the creative potential of this extraordinary resource. For more information, visit mgpingredients.com.

Cautionary Note Regarding Forward-Looking StatementsThe forward-looking statements contained herein include, but are not limited to, statements about the expected effects on MGP Ingredients, Inc. ("the Company") of the recent acquisition of Luxco, Inc. and its affiliates ("Luxco"), anticipated earnings enhancements, synergies and other strategic options. Forward looking statements are usually identified by or are associated with such words as intend, plan, believe, estimate, expect, anticipate, hopeful, should, may, will, could, encouraged, opportunities, potential, and/or the negatives or variations of these terms or similar terminology.

These forward-looking statements reflect managements current beliefs and estimates of future economic circumstances, industry conditions, Company performance, and Company financial results and financial condition and are not guarantees of future performance. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements. Important factors that could cause actual results to differ materially from our expectations include, among others: (i) the ability to realize the anticipated benefits of the acquisition of Luxco; (ii) the ability to successfully integrate the businesses; (iii) disruption from the acquisition of Luxco making it more difficult to maintain business and operational relationships; and (iv) significant transaction costs and unknown liabilities. Additional factors that could cause results to differ materially include, among others, (i) disruptions in operations at our Atchison facility, our Lawrenceburg facility, or any Luxco facility, (ii) the availability and cost of grain, flour, and agave, and fluctuations in energy costs, (iii) the effectiveness of our grain purchasing program to mitigate our exposure to commodity price fluctuations, (iv) the effectiveness or execution of our strategic plan, (v) potential adverse effects to operations and our system of internal controls related to the loss of key management personnel, (vi) the competitive environment and related market conditions, (vii) the impact of the COVID-19 pandemic, (viii) the ability to effectively pass raw material price increases on to customers, (ix) our ability to maintain compliance with all applicable loan agreement covenants, (x) our ability to realize operating efficiencies, (xi) actions of governments, and (xii) consumer tastes and preferences. For further information on these and other risks and uncertainties that may affect our business, including risks specific to our Distillery Products and Ingredient Solutions segments, see Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2020 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.

Non-GAAP Financial Measures In addition to reporting financial information in accordance with U.S. GAAP, the company provides certain non-GAAP financial measures that are not in accordance with, or alternatives for, GAAP. In addition to the comparable GAAP measures, MGP has disclosed adjusted operating income, adjusted income before taxes, adjusted net income, adjusted MGP earnings, basic and diluted adjusted earnings per share, and adjusted EBITDA. The presentation of non-GAAP financial measures should be reviewed in conjunction with operating income, income before taxes, net income, net income attributable to common shareholders and basic and diluted earnings per share computed in accordance with U.S. GAAP and should not be considered a substitute for these GAAP measures. The non-GAAP adjustments referenced in the section entitled "Reconciliation of Selected GAAP Measures to Non-GAAP Measures," take into account the impacts of items that are not necessarily ongoing in nature and/or predictive of the Company's operating trends. We believe that these non-GAAP measures provide useful information to investors regarding the company's performance and overall results of operations. In addition, management uses these non-GAAP measures in conjunction with GAAP measures when evaluating the Companys operating results compared to prior periods on a consistent basis, assessing financial trends and for forecasting purposes. Non-GAAP financial measures may not provide information that is directly comparable to other companies, even if similar terms are used to identify such measures. The attached schedules provide a full reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measure.

For More InformationInvestors & Analysts:Mike Houston646-475-2998or investor.relations@mgpingredients.com

Media:Greg Manis913-360-5440 or greg.manis@mgpingredients.com

MGP INGREDIENTS, INC.OPERATING INCOME ROLLFORWARD(Dollars in thousands)

Operating income, quarter versus Operating Income Change quarterOperating income for quarter ended $ 11,338 June 30, 2020Increase in gross profit - Branded 18,286 161.3 pp^Spirits segment (a)Increase in gross profit - Distillery 16,131 142.3 ppProducts segmentIncrease in gross profit - Ingredient 1,708 15.0 ppSolutions segmentIncrease in selling general and (19,800 ) (174.6 ) ppadministrative expensesOperating income for quarter ended $ 27,663 144.0 % June 30, 2021

Operating income, year to date versus Operating Income Change year to dateOperating income for year to date $ 25,046 ended June 30, 2020Increase in gross profit - Distillery 26,317 105.1 pp^Products segment (a)Increase in gross profit - Branded 18,182 72.6 ppSpirits segmentIncrease in gross profit - Ingredient 714 2.8 ppSolutions segment^(a)Increase in selling general and (22,096 ) (88.2 ) ppadministrative expensesOperating income for quarter ended $ 48,163 92.3 % June 30, 2021

(a) Percentage points (pp).

MGP INGREDIENTS, INC.EARNINGS PER SHARE (EPS) ROLLFORWARD

Change in basic and diluted EPS, Basic and Change quarter versus quarter Diluted EPSBasic and diluted EPS for quarter $ 0.50 ended June 30, 2020Increase in operations^(b) 0.74 148.0 pp^ (a)Change in interest expense, net^(b) (0.02 ) (4.0 ) ppTax: Change in effective tax rate (0.02 ) (4.0 ) ppIncrease in shares outstanding (0.29 ) (58.0 ) ppresulting from the MergerBasic and diluted EPS for quarter $ 0.91 82.0 % ended June 30, 2021

Change in basic and diluted EPS, year to Basic and Change date versus year to date Diluted EPSBasic and diluted EPS for year to date $ 1.07 ended June 30, 2020Increase in operations^(b) 1.04 97.2 pp^ (a)Decrease in weighted average shares 0.01 0.9 ppoutstanding, excluding the Merger impactsChange in interest expense, net^(b) (0.02 ) (1.9 ) ppIncrease in shares outstanding resulting (0.29 ) (27.1 ) ppfrom the MergerBasic and diluted EPS for year to date $ 1.81 69.1 % ended June 30, 2021

(a) Percentage points (pp).(b) Items are net of tax based on the effective tax rate for the base year (2020).

MGP INGREDIENTS, INC.SALES BY OPERATING SEGMENT(Dollars in thousands)

DISTILLERY PRODUCTS SALES Quarter Ended June 30, Quarter versus Quarter Sales Change Increase/(Decrease) 2021 2020 $ Change % ChangeBrown goods $ 43,766 $ 25,325 $ 18,441 72.8 %White goods 18,205 14,873 3,332 22.4 Premium beverage 61,971 40,198 21,773 54.2 alcoholIndustrial alcohol 14,770 22,953 (8,183 ) (35.7 ) Food grade alcohol 76,741 63,151 13,590 21.5 Fuel grade alcohol 4,753 1,174 3,579 304.9 Distillers feed and 4,672 6,781 (2,109 ) (31.1 ) related co-productsWarehouse services 4,182 3,699 483 13.1 Total Distillery $ 90,348 $ 74,805 $ 15,543 20.8 %Products

BRANDED SPIRITS SALES Quarter Ended June Quarter versus Quarter 30, Sales Change Increase/(Decrease) 2021 2020 $ Change % ChangeUltra premium $ 10,093 $ 320 $ 9,773 3,054.1 %Premium 6,301 47 6,254 13,306.4 Mid 17,786 ? 17,786 n/aValue 20,944 ? 20,944 n/aOther 5,302 17 5,285 31,088.2 Total Branded Spirits $ 60,426 $ 384 $ 60,042 15,635.9 %

INGREDIENT SOLUTIONS SALES Quarter versus Quarter Quarter Ended June 30, Sales Change Increase / (Decrease) 2021 2020 $ Change % ChangeSpecialty wheat $ 12,598 $ 9,122 $ 3,476 38.1 %starchesSpecialty wheat 8,352 6,013 2,339 38.9 proteinsCommodity wheat 2,663 1,774 889 50.1 starchesCommodity wheat 552 462 90 19.5 proteinsTotal Ingredient $ 24,165 $ 17,371 $ 6,794 39.1 %Solutions

MGP INGREDIENTS, INC.SALES BY OPERATING SEGMENT(Dollars in thousands)

DISTILLERY PRODUCTS SALES Year to Date versus Year to Year to Date Ended June 30, date Sales Change Increase/ (Decrease) 2021 2020 $ Change % ChangeBrown goods $ 86,807 $ 53,970 $ 32,837 60.8 %White goods 34,862 31,712 3,150 9.9 Premium beverage 121,669 85,682 35,987 42.0 alcoholIndustrial 32,106 44,571 (12,465 ) (28.0 ) alcoholFood grade 153,775 130,253 23,522 18.1 alcoholFuel grade 7,270 2,696 4,574 169.7 alcoholDistillers feedand related 9,644 13,770 (4,126 ) (30.0 ) co-productsWarehouse 8,283 7,600 683 9.0 servicesTotal Distillery $ 178,972 $ 154,319 $ 24,653 16.0 %Products

BRANDED SPIRITS SALES Year to Date versus Year to Year to Date Ended June date 30, Sales Change Increase/ (Decrease) 2021 2020 $ Change % ChangeUltra premium $ 10,574 $ 684 $ 9,890 1,445.9 %Premium 6,383 171 6,212 3,632.7 Mid 17,786 ? 17,786 n/aValue 20,944 ? 20,944 n/aOther 5,309 17 5,292 31,129.4 Total Branded $ 60,996 $ 872 $ 60,124 6,895.0 %Spirits

INGREDIENT SOLUTIONS SALES Year to Date versus Year Year to Date Ended June to date 30, Sales Change Increase/ (Decrease) 2021 2020 $ Change % ChangeSpecialty wheat $ 22,820 $ 19,334 $ 3,486 18.0 %starchesSpecialty wheat 14,398 12,378 2,020 16.3 proteinsCommodity wheat 4,946 3,651 1,295 35.5 starchesCommodity wheat 1,130 1,088 42 3.9 proteinsTotal Ingredient $ 43,294 $ 36,451 $ 6,843 18.8 %Solutions

MGP INGREDIENTS, INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)(Dollars in thousands)

Quarter Ended June 30, Year to Date Ended June 30, 2021 2020 2021 2020Sales $ 174,939 $ 92,560 $ 283,262 $ 191,642 Cost of sales 118,112 71,858 194,136 147,729 Gross profit 56,827 20,702 89,126 43,913 Selling,general and 29,164 9,364 40,963 18,867 administrativeexpensesOperating 27,663 11,338 48,163 25,046 incomeInterest (1,104 ) (628 ) (1,592 ) (1,107 ) expense, netOther income (88 ) 330 (58 ) 167 (loss), netIncome before 26,471 11,040 46,513 24,106 income taxesIncome tax 6,412 2,550 11,027 5,774 expenseNet income 20,059 8,490 35,486 18,332 Incomeattributableto 150 57 299 123 participatingsecuritiesNet lossattributableto (76 ) ? (76 ) ? noncontrollinginterestNet incomeattributableto MGP $ 19,985 $ 8,433 $ 35,263 $ 18,209 Ingredients,Inc. Basic anddilutedweighted 21,916,721 16,899,079 19,436,143 16,956,502 average commonshares Basic anddiluted $ 0.91 $ 0.50 $ 1.81 $ 1.07 earnings percommon share

MGP INGREDIENTS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)(Dollars in thousands)

June 30, December 31, June 30, December 2021 2020 2021 31, 2020 LIABILITIESASSETS AND STOCKHOLDERS? EQUITYCurrent Current Assets: Liabilities:Cash and Currentcash $ 37,243 $ 21,662 maturities of $ 3,227 $ 1,600 equivalents long-term debtReceivables, 79,110 56,966 Accounts 37,434 30,273 net payable Federal andInventory 232,292 141,011 state liquor 9,175 107 taxes payablePrepaid 4,996 2,644 Income taxes 1,721 704 expenses payableTotal AccruedCurrent 353,641 222,283 expenses and 31,881 20,645 Assets other Total Current 83,438 53,329 Liabilities Property, Otherplant, and 378,962 313,730 liabilities: equipmentLess Long-termaccumulated debt, lessdepreciation (189,330 ) (181,738 ) current 36,870 38,271 and maturitiesamortizationProperty, CreditPlant, and 189,632 131,992 agreement - 230,294 ? Equipment, revolvernetOperating Long-termlease 9,169 5,151 operating 6,626 3,057 right-of-use leaseassets, net liabilitiesInvestment Otherin joint 5,739 ? noncurrent 5,117 7,094 ventures liabilitiesIntangible 219,872 890 Deferred 58,450 2,298 assets, net income taxesGoodwill 228,243 2,738 Total 420,795 104,049 LiabilitiesOther assets 8,001 3,521 Total equity 593,502 262,526 TOTALTOTAL ASSETS $ 1,014,297 $ 366,575 LIABILITIES $ 1,014,297 $ 366,575 AND TOTAL EQUITY

MGP INGREDIENTS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(Dollars in thousands)

Year to Date Ended June 30, 2021 2020Cash Flows from Operating Activities Net income $ 35,486 $ 18,332 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization 8,425 6,344 Net loss attributable to noncontrolling interest (76 ) ? Gain on sale of assets ? (8 ) Share-based compensation 4,767 1,801 Deferred income taxes, including change in (1,568 ) (99 ) valuation allowanceUnrealized gain on foreign currency 7 ? Changes in operating assets and liabilities, net of effects of acquisition:Receivables, net 7,531 (13,174 ) Inventory (408 ) (9,983 ) Prepaid expenses (897 ) (1,973 ) Income taxes payable 1,017 5,778 Accounts payable (12,996 ) (4,218 ) Accrued expenses and other 7,987 3,126 Federal and state liquor taxes payable 716 132 Other, net (2,537 ) (72 ) Net cash provided by operating activities 47,454 5,986 Cash Flows from Investing Activities Additions to property, plant, and equipment (18,336 ) (10,177 ) Purchase of business, net of cash acquired (149,599 ) (2,750 ) Contributions to equity method investment (988 ) ? Proceeds from sale of property ? 688 Other, net (1,312 ) (168 ) Net cash used in investing activities (170,235 ) (12,407 ) Cash Flows from Financing Activities Payment of dividends and dividend equivalents (4,707 ) (4,101 ) Purchase of treasury stock (765 ) (4,395 ) Loan fees paid related to borrowings (666 ) (1,148 ) Principal payments on long-term debt ? (199 ) Proceeds from credit agreement - revolver 242,300 54,700 Payments on credit agreement - revolver (10,306 ) (30,000 ) Payment on assumed debt as part of the Merger (87,497 ) ? Net cash provided by financing activities 138,359 14,857 Effect of exchange rate changes on cash 3 ? Increase in cash and cash equivalents 15,581 8,436 Cash and cash equivalents, beginning of period 21,662 3,309 Cash and cash equivalents, end of period $ 37,243 $ 11,745

MGP INGREDIENTS, INC.RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (UNAUDITED)(in thousands)

Quarter Ended June 30, 2021 Income MGP Basic Gross Operating before Net Earnings^ and Profit Income Income Income (a) Diluted Taxes EPSReportedGAAP $ 56,827 $ 27,663 $ 26,471 $ 20,059 $ 19,985 $ 0.91 ResultsAdjusted to remove:Inventorystep-up -Branded 2,529 2,529 2,529 2,529 2,510 0.11 Spirits ^(b)Businessacquisition ? 6,738 6,738 5,535 5,473 0.25 costs^(c)AdjustedNon-GAAP $ 59,356 $ 36,930 $ 35,738 $ 28,123 $ 27,968 $ 1.27 results

Quarter Ended June 30, 2020 Income MGP Basic Gross Operating before Net Earnings^ and Profit Income Income Income (a) Diluted Taxes EPS Reported GAAP $ 20,702 $ 11,338 $ 11,040 $ 8,490 $ 8,433 $ 0.50 Results Adjusted to remove: CEO transition ? 783 783 684 684 0.04 costs^ (d) Adjusted Non-GAAP $ 20,702 $ 12,121 $ 11,823 $ 9,174 $ 9,117 $ 0.54 results

Year to Date Ended June 30, 2021 Income MGP Basic Gross Operating before Net Earnings^ and Profit Income Income Income (a) Diluted Taxes EPSReportedGAAP $ 89,126 $ 48,163 $ 46,513 $ 35,486 $ 35,263 $ 1.81 ResultsAdjusted to remove:Inventorystep-up -Branded 2,529 2,529 2,529 2,529 2,510 0.13 Spirits ^(b)Businessacquisition ? 8,628 8,628 7,303 7,241 0.37 costs^(c)AdjustedNon-GAAP $ 91,655 $ 59,320 $ 57,670 $ 45,318 $ 45,014 $ 2.31 results

Year to Date Ended June 30, 2020 Income MGP Basic Gross Operating before Net Earnings^ and Profit Income Income Income (a) Diluted Taxes EPS Reported GAAP $ 43,913 $ 25,046 $ 24,106 $ 18,332 $ 18,209 $ 1.07 Results Adjusted to remove: CEO transition ? 1,368 1,368 1,258 1,258 0.07 costs^ (d) Adjusted Non-GAAP $ 43,913 $ 26,414 $ 25,474 $ 19,590 $ 19,467 $ 1.14 results

(a)MGP Earnings has been defined as "Net income attributable to MGP Ingredients, Inc."

(b)The finished goods Inventory valuation step-up costs are included in the Condensed Consolidated Statement of Income within Cost of goods by the Branded Spirits segment. The adjustment includes the purchase accounting adjustment to value the acquired finished goods inventory at its estimated fair value.

(c)The Business acquisition costs are included in the Condensed Consolidated Statement of Income within the Selling, general and administrative line item. The adjustment includes transaction and integration costs associated with the merger with Luxco.

(d)The CEO transition costs are included in the Condensed Consolidated Statement of Income within the Selling, general and administrative line item. The adjustment includes additional employee related costs in connection with the transition of CEOs.

MGP INGREDIENTS, INC.RECONCILIATION OF NET INCOME TO Adjusted EBITDA (UNAUDITED)(in thousands)

Quarter Ended June 30, Year to Date Ended June 30, 2021 2020 2021 2020Net Income $ 20,059 $ 8,490 $ 35,486 $ 18,332 Interest expense 1,104 628 1,592 1,107 Income tax expense 6,412 2,550 11,027 5,774 Depreciation and amortization 5,115 3,220 8,425 6,344 Equity method investment 334 ? 334 ? Inventory step-up - Branded 2,529 ? 2,529 ? SpiritsBusiness acquisition costs 6,738 ? 8,628 ? CEO transition costs ? 783 ? 1,368 Adjusted EBITDA $ 42,291 $ 15,671 $ 68,021 $ 32,925

The non-GAAP adjusted EBITDA measure is defined as earnings before interest, taxes, depreciation and amortization, equity method investment, inventory step-up, business acquisition costs and CEO transition costs. See section "reconciliation of selected GAAP measure to non-GAAP measures" for further details on each of these non-GAAP Items.

MGP INGREDIENTS, INC.Purchase Accounting - Summary of Preliminary Fair Value Step Up(UNAUDITED)(in thousands)

The Merger was accounted for as a business combination in accordance with Accounting Standard Codification 805 ASC 805), Business Combinations, and as such, assets acquired, liabilities assumed, and consideration transferred were recorded at their estimated fair values on the acquisition date. The fair value of the assets and liabilities are based upon a preliminary assessment of fair value and may change as valuations for certain tangible assets, intangible assets and contingent liabilities are finalized and the associated income tax impacts are determined. The Company expects to finalize the purchase price allocation as soon as practicable, but no longer than one year from the acquisition date. The table below reflects the summary for Finished Goods inventory, Whiskey inventory, Property, plant and equipment, and Distributor relationships preliminary purchase price accounting step up to fair value, the related amortization period and the Income Statement caption within which the adjustment is included.

Income Q2 2021 Step Up Amortization Statement Income Value Period Caption Statement ImpactFinished Goods Inventory $ 2,529 3 months Cost of $ 2,529 salesWhiskey Inventory 1,065 10 years Cost of 27 salesProperty, plant and 7,340 various Cost of 560 equipment salesDefinite-livedintangible asset - 41,400 20 years SG&A 518 DistributorrelationshipsTotal Fair Value Step Up $ 52,334 $ 3,634